If GST on health insurance is Exempted, not Zero-rated ✅
This means — Exempted GST on life and health insurance won’t directly reduce premiums by 18%.
Earlier, insurers were able to claim GST input credits on their expenses. Now, with zero-rating, that credit goes away and becomes a cost to them.
🔹 Before (18% GST applicable with ITC available)
•Base Premium: ₹1,00,000
•GST
@18%: ₹18,000
•Total Payable by Customer: ₹1,18,000
•Insurance company could claim ITC on GST paid for expenses (advertising, rent, IT infra, etc.) → reducing their internal costs.
⸻
🔹 After (Zero-rated, no GST charged, but no ITC benefit)
•Base Premium: ₹1,00,000
•GST: NIL
•Total Payable by Customer: ₹1,00,000
•But, insurers lose ITC (say 10–11% of base premium cost), which now becomes their expense.
So realistically, we can expect only about a 7–8% reduction in premiums, not the full 18%.
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